Supreme Group Settles False Claims for $101M; Whistleblower to Get $16M
Supreme Group has agreed to pay $101 million to settle allegations that the company and/or its subsidiaries knowingly submitted or caused the submission of false claims to the federal government for food and water supplied to the armed forces, the U.S. Department of Justice announced earlier this week.
According to court documents, Supreme Foodservice AG, together with Supreme Foodservice KG, now called Supreme Foodservice FZE, devised and implemented a scheme to overcharge the United States in order to make profits over and above those provided in the $8.8 billion subsistence prime vendor (SPV) contract. The companies fraudulently inflated the price charged for local market ready goods (LMR) and bottled water sold to the United States under the SPV contract. The Supreme companies did this by using a UAE company it controlled, Jamal Ahli Foods Co. LLC (JAFCO), as a middleman to mark up prices for fresh fruits and vegetables and other locally-produced products sold to the U.S. government, and to obscure the inflated price the Supreme companies were charging for bottled water. The fraud resulted in a loss to the government of $48 million.
Supreme AG, Supreme FZE and Supreme’s owners (referred to in court documents as Supreme Owners #1 and #2) made concentrated efforts to conceal Supreme’s true relationship with JAFCO, and to make JAFCO appear to be an independent company. They also took steps to make JAFCO’s mark-up on LMR look legitimate, and persisted in the fraudulent mark-ups even in the face of questions from DSCP about the pricing of LMR.
Even though the SPV contract stated that the Supreme food companies should charge the government the supplier’s price for the goods, emails between executives at the companies (referred to as Supreme Executive #1, #2, etc) reveal the companies’ deliberate decision to inflate the prices. Among other things, Supreme Owner #1 increased the mark-up that JAFCO would impose on non-alcoholic beer from 25 percent to 125 percent.
Supreme Group’s subsidiary Supreme Logistics FZE also has agreed to pay $25 million to resolve alleged false billings by Supreme Logistics in connection with shipping contracts between the U.S. Transportation Command (USTRANSCOM), located at Scott Air Force Base in Illinois, and various shipping carriers to transport food to U.S. troops in Afghanistan during Operation Enduring Freedom. The shipping carriers transported cargo destined for U.S. troops from the United States to Latvia or other intermediate ports, and then arranged with logistics vendors, including Supreme Logistics, to carry the cargo the rest of the way to Afghanistan. The United States alleged that Supreme Logistics falsely billed USTRANSCOM for higher-priced refrigerated trucks when it actually used lower-priced non-refrigerated trucks to transport the cargo.
The lawsuit was initially filed under the qui tam or whistleblower provisions of the False Claims Act, by Michael Epp, Supreme GmbH’s former Director, Commercial Division and Supply Chain. The False Claims Act prohibits the submission of false claims for government money or property and allows the United States to recover treble damages and penalties for a violation. Under the Act’s whistleblower provisions, a private party may file suit on behalf of the United States and share in any recovery. The case remained under seal to permit the United States to investigate the allegations and decide whether to intervene and take over the case. Epp will receive $16.16 million as his share of the government’s settlement of the lawsuit.
The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments. We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud. Read more about our expertise in False Claims Act cases and how you can take action.